Are farmers losing cash, marketing edge post CWB?

An interview I did last week reopened the question of whether farmers have lost a crucial marketing and money-making edge that their wheat and other grains once gave them.

The interview was with marketers of Canadian grain to West Africa, who noted the same problems and upset over Canadian grain quality and consistency that was raised by a Singaporean buyer last spring.

In both cases, the transition from the Canadian Wheat Board-administered system and changes in Canadian Grain Commission grading were said to be behind poorer-than-expected Canadian wheat showing up overseas.

ADVERTISEMENT

From interviews this week with a range of Canadian grain trade officials and organizations, it seems to me that the industry has failed, with some buyers at least, to alert customers that getting high-quality and consistent-quality Canadian grain is no longer “business as usual.”

In fact, the business has profoundly changed, and that doesn’t necessarily seem to have been communicated to some buyers.

Interviews over the past couple of years have given me the sense that representatives of Canadian grain companies, industry organizations and farmer organizations have worked hard and travelled frequently to reassure overseas buyers of Canadian grain that this nation will remain a source of the world’s best quality wheat, durum and barley.

That’s been a crucial role for these organizations to play because many customers were worried by the ending of the CWB monopoly and needed to be reassured.

ADVERTISEMENT

However, perhaps they went too far in reassuring buyers that nothing substantial had changed, when in fact the system is now profoundly different. It can still produce excellent, world’s-best grain, but you can’t just assume you’ll still receive that with a standard contract.

The old wheat board focused on farmer returns and on excellent customer satisfaction. Sometimes critics believed the board went too far to keep customers happy and created an unnecessarily complicated and costly system that might not have made farmers more money than a simpler bulk system like that in the United States.

However, today’s system is based on a handful of private sector grain companies that play in the hard-nosed business of the grain trade with a lighter CGC grading system. The few existing organizations, such as the Canadian International Grains Institute, and new organizations such as Cereals Canada, are trying to fill the CWB’s old customer satisfaction role without having its legal and organizing powers.

ADVERTISEMENT

Farmers have the most to lose here if this situation has been botched and isn’t soon fixed. No one can take overseas markets for granted, with new export grain competitors emerging in recent years.

And no one should expect private grain companies to put farmer, Canadian or grain industry concerns at the top of their lists of priorities. They are owned by shareholders and serve their needs, which are not necessarily the same as those of farmers. Something that might be valuable for a farmer might not seem worthwhile to a grain company.

Farmers need to keep a careful eye on this. They’re the ones who have the biggest stakes in the game, and they can’t afford to trust private companies, government agencies or politicians to be looking out for them.

It’s their industry and they need to take ownership of this issue to ensure something they have always been able to depend on isn’t being given away without their even noticing.

Comments

John Wayne

This is going to be an ongoing problem when you institute a draconian marketing system with no foresight or regulation. We now know why there was no cost benefit analysis done by the federal government before they instituted marketing freedom to our foreign majority grain companies. Pure fiction is all I can say about our current Fed Ag Minister and his minority farmer supporters. But absolute majority of the retail Ag industry loves Ritz. My thoughts so far going forward Ritz will never lose the support of that retail Ag crowd. Be patience railways I am sure Ritz will wave his magic wand for you too. I don’t know how much more I can afford of Ritz’s Farmer First Program. You can rest assured Ritz has lost my vote! I lost the right to vote once as a farmer 47.1 CWB act, so hopefully I will have that right next election.

Andrew

Your use of draconian is perplexing. I would have ascribed it to the single desk Canadian Wheat Board instead. As of right now, I am unaware of any grain company that is would charge farmers dollars per bushel in order to resell their own grain to a buyer of their choosing. I am also unaware of any grain company that is telling a farmer that they can only deliver 60% of their contracted grain and to wait until the next crop year to deliver the remaining amount. Both of those personally happened to me under the single desk.

ed

What is a word that we could use that is worse than Draconian, right! Like one anti wheat board sympathizing reporter recently said about the situation now, “This is even worse than the crappy CWB.” That is kind of like saying……. I’m sure you get the point.

Erikxyz

Harpers elimination of the old Wheat Board was a move worthy of a power broker doing massive privatizations as the former Soviet Union collapsed.

The reality is that when the buyers realize that their protests are not going to produce better quality wheat, they will go quiet. Soon you will no longer be hearing buyer complaints about the quality of Canadian wheat. Buyers memories of consistent quality from one shipment to the next will fade soon enough.

Another interesting fact; most average voters in places like Montreal, Toronto and Vancouver who have been paying attention actually believe that the vast majority of Prairie farmers wanted to get rid of the Wheat Board.

Will Prairie voters reward Mr. Harper again in October?

Andrew

Let us remember that all 3 of the problematic varieties for quality (low gluten strength) were registered in the single desk era. There were also some very poor years for quality across Western Canada in the first years of the open market.

What I find interesting is that we are now hearing reports from our trade missions that during the single desk buyers were not offered all of the varieties of grain that we grow. The Canadian Wheat Board took pride in our CWRS on a world stage (which we should be proud of for sure) but did not do a good enough job exalting the merits of CPS to non-bread customers (steam buns, noodles, etc).

Erikxyz

You are largely missing the point, perhaps intentionally, with your Orwellian obfuscation and deflection.

Prairie farmers have suffered massive economic losses because the Harper Government destroyed the old Wheat Board and you can’t change that fact.

ed

You can’t offer a product once you have run out of it and swept out the bins. The over seas global customer’s scramble to be first in line for next year kept the price up in the single desk era. Now between the Canadian farmer saying, “I’m not going to give my best of quality wheat away at these ridiculously low prices” and the end user none too happy with the mostly American grain companies cutting the top quality CRSW with the fusarium prone and spreading, low quality wheats, previously only available in the USA, we have a situation where the rail companies, (Canadian National and Pacific) might as well haul oil in the mean time. Face it, they would both have to be 200-300 percent over capacities to make the dis-functionality of these grain company’s sporadic and intentionally price depressing logistics work like they did before Aug. 1st, 2012. The rail companies can’t do that without having the freight cap lifted up substantially. So the cap will be raised and the farmers will dearly pay for the over capacity that is coming. Of coarse you can’t say it like that or the commoners might catch on. It’s all very complicated don’t ya know, so don’t be going around trying to understand it.

Kevin

There’s a lot of missing of the point here. We need to fix the transportation system. Grain companies won’t compete to buy grain if they can’t get to customers. The CWB monopsony was able to force farmers to hold back grain, and while this allowed the railroads to get away with inadequate service, it did nothing to encourage investment in surge capacity.
Masking the growing rail transportation problem for decades didn’t work; maybe now that the lack of rail capacity is so glaringly obvious, maybe something will be done about the lack of investment in rail capacity. Canada relies heavily on exports. News flash – monopolies are bad for a country’s economy and allowing them to exist unfettered encourage abuses of weaker players, and a monopoly in rail transportation is no different.

Nothing justifies the draconian property rights abuses of the single desk, including it’s ability to hold farmer’s grain off the market in a orderly way.

Terry

Duh! What about customer service, pride in product being sold and protecting the primary producers that provide. The product the big few grain companies sell, ship deliver and process. Yes it is a shareholder world but these market forces could be being used to improve the market not degrade it and make farmers look like a bunch of sheep just following the path of least resistance. Not much different that slave owners treating their slaves badly. So, corporate slavery and an all American atitude prevail what else is new. The rest of the world is catching up and we had better adapt or we will be left with a mere shell of a grain industry . We should also remember that we are a huge country that is far away from markets and the cwb and crow rate handled these things. Just like spoiled children we take everything for granted and want what we don t have.
A good friend has done very well on the post cwb board selling his grain and capturing a premium over time. The big few get producers into trouble so that they have to sell at certain times of the year. Corporate year end spells out cash crunch and fear of not paying bills. The cwb took longer to pay out producers in the end they get more and the profit stays here. I guess we stopped thinking of old adages a long time ago. Good things come to those who wait comes to mind.